"Here It Comes",California appears to be functionally insolvent. As in now.

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I've noted that a few people have cast questioning eyes at my triangle, and the 210 target off it.
Some have claimed that I should be using a log scale on that chart.Yeah, yeah. I've heard that.

Now let's look at what we've learned the last few days, weeks and months:

California appears to be functionally insolvent. As in now.

How far is the state from widespread inability to pay police officers and firemen,
and how long does it take before widescale riots break out when those who leach off the government teat for a living have their checks interrupted?

It is increasingly clear that there is absolutely no way that the "big banking system" comprised of firms like Citi, Bank America, JP Morgan and Wells Fargo, along with a handful of others, can make it through this without one trillion or more in additional funds. Yes, it really is that bad.

It is also increasingly clear that there are literally hundreds of midsize and smaller banks that are perfectly fine. They did not lever up, they did not write a bunch of crap commercial or residential construction paper that cannot be serviced and they most certainly did not drink the KoolAid of securitized synthetic garbage debt.

Even in bad economic times traditional banking is a very profitable business - so long as you lend money to people who can pay you back or you have sufficient collateral so that if they default you don't lose your shirt. These sound banks have been frozen out of the "money fountain" and also out of the opportunity to be rewarded for their prudence.

The Fed's policies have made it impossible for them to attract capital at any reasonable deposit or CD interest rate and yet their capital ratios are very healthy. These firms should and must stand and yell NOW. There is nothing wrong with the banking system. There is plenty wrong with a handful of big banks who engaged in outrageous and possibly even criminal conduct.

Speaking of possible criminal conduct, it has now been revealed that Indymac was not the only bank that improperly booked funds and violated reporting standards - there were four more. The government has refused to identify them. Gee, can you think of four Thrifts that got in trouble in the last year and disappeared? It's not difficult is it? FOIA's anyone? Speaking of which, where's that new President Obama "transparency" in government?

Ben Bernanke's neoclassical monetary theories have been proved incorrect. He has doubled base money in the last few months. Under neoclassical monetary theory this should have immediately produced inflation as the increase in base money would have spurred an increase in credit money (cash and credit are not the same thing, although they spend the same.)

However, neoclassical monetary theory relies on a false premise - that the existence of additional base money causes the creation of credit - that is, the monetary tail wags the credit dog. In fact it is the other way around - credit is the dog and the tail cannot wag the dog. When worthy borrowers refuse to take out additional loans and unworthy borrowers cannot borrow additional base money has no effect, because each dollar of credit money must be matched by a dollar of debt. No new debt issue, no credit money expansion. Debt cannot expand because the carrying capacity for it in the economy has been reached, ergo absent Weimar-quantity printing of raw cash (on the order of $20 trillion dollars!) deflation cannot be halted until the bad debt is forced from the system.

This excess came about because of knowingly unsustainable leverage - that is, credit-to-money ratios. Unfortunately until the total leverage in the system is reduced to sustainable levels there is nothing that can be done to halt demand destruction and economic contraction. Transferring leverage from the private sector to the government cannot change this outcome. In an economic system where most monetary exchange is in fact credit deleveraging always produces deflation which cannot be halted until leverage ratios return to sane and sustainable levels economy-wide.

A nation's standard of living is not based on its ability to borrow in aggregate, but by its ability to produce. Therefore, we cannot borrow our way to prosperity nor can attempts to "spur lending" lead us out of recession. Rather we must produce actual goods and services - not push paper - to grow our way out. Over the last 20 years we have replaced production with false claims of "wealth creation" that are nothing more than the creation of additional credit through intentional mispricing of risk. That scam has now come to an end as the true lack of value has been exposed. All major busts in reasonably-modern time (e.g. back to TulipMania) have come from credit excess.

Ben Bernanke and Alan Greenspan before him had the responsibility and authority to regulate the credit system, as did the OTS, OCC, SEC and Congress. ALL abdicated that responsibility; Congress in particular appears not to understand how these functions work, but the other institutions do and their abdication was willful.

There are all sorts of theories about why prices of both stocks and bonds fell this last couple of weeks. They are all wrong. There is only one reason - supply and demand. Treasuries are being rained into the market like a monsoon and this is depressing price; what's worse is that it is sucking up money from the system which then causes a supply:demand imbalance in stocks.

In order to issue the sort of supply necessary to fund the grand schemes of former Treasury Secretary Paulson, the last and present Congress and President Obama, as well as "keeping the promises made" by the previous administration (some $7 trillion worth!) the amount of supply that must be issued will literally destroy both stock and bond prices.

We now know that not only Tim Geithner evaded taxes but in addition Tom Daschle, Obama's Health and Human Services nominee, failed to pay $100,000 in back taxes and interest. What's worse is that those taxes were incurred due to a car and driver provided Mr. Daschle by a private equity firm raising very serious conflict of interest issues.

Where is my "change that we can believe in" Mr. President? I see only the very same corruption and influence peddling that Washington DC has been known for.

There is a tremendous amount of anger rising in America. You don't see it - yet - in public, but it is there, simmering just under the surface.

President Obama made note of it when it was revealed that nearly $20 billion was paid out in bonuses to Wall Street firms this year - after they took $70 billion of taxpayer money in direct assistance. That's about 30% of the total that went right out the door as bonuses. In effect, we are now paying taxes so that Wall Street can hand it out to the very people who got us into this mess!

Government tax receipts on all levels are cratering. Income tax and sales tax numbers are frightening with many state governments reporting double-digit drops in the last month. All these handouts and bailouts sound good but where is the money going to come from? When the money runs out the game is over in truly-spectacular fashion. http://market-ticker.org/

Seriously, California's unemployment rate is close to 10%, we still don't have a budget and we have no money, they are going to be giving IOU's for state tax refunds. and we are in a drought with water rationing beginning in places. If it gets too much worse, it could get interesting.

I suspect it will get very interesting especially when the cities start defaulting and stopping critical services. I'll wager that NY and IL are not far behind CA in terms of debt. I'm not sure, but I don't think CO is that bad - yet. They are talking about closing a few prisons, minimum security I think. Oh they also stopped giving senior citizens homestead exemptions! Thanks Gov. Ritter!

"If every poor man is to come here and start requesting money for all his children, the applicants will never be satisfied and the nation's finances will collapse." Emperor Tiberius: Tacitus:Annals

Budget cuts may force U.S. Postal Service to cut deliver
Bronx Zoo funding endangered by budget cuts
Paterson unveils dire New York State budget
Mayor Bloomberg's bare-bones budget for next year will slash the city work force by 23,000 and drastically increase its sales tax, officials revealed Thursday.

The plan hinges on the shaky prospect of help from the federal and state governments and from stubborn unions.

The mayor will introduce his executive budget today; it also calls for cuts in big-ticket construction projects and for city employees to cough up cash for health care, according to those briefed on the plan.

Homeowners will lose their $400 rebates - but won't be hit with new property taxes, a proposal City Council members had vowed to block.

Seriously, California's unemployment rate is close to 10%, we still don't have a budget and we have no money, they are going to be giving IOU's for state tax refunds. and we are in a drought with water rationing beginning in places. If it gets too much worse, it could get interesting.

Our state Controller, John Chiang, held a press conference luncheon at the Ritz Carlton in Dana Point to announce his decision to issue IOUs. Gee, I wonder who paid for that?? This idiot couldn't tell us that from his office???

This state has sunk into a sea of sh*t. We can all thank the liberals and wimpy ass RINOs for all of this. :mad:

Louisiana has the best politicians that money can buy. It is true; I have seen it for many years. Believe it or not, we are Number 1 in something good. The only state in the nation to have job growth in 2008 and the city I live in is tops. LA had job growth in every month except September,the month of the 2 hurricanes.

CA could very easily fix their red ink by allowing offshore drilling. The dumb ass politicians would rather shut down the whole government sector rather than do that. It is insane to not tap into this resource. The green, eco and PETA freaks are ruining that states.